On August 6, the US Treasury department designated China as a currency manipulator, dealing a fresh blow to the world economy and global financial markets that are already grappling with multiple uncertainties. This move has not only violated international rules; it also contravened domestic law in the US. It is a worrying development.

Since the start of reform and opening-up, China has consistently and unswervingly pursued reform of the renminbi exchange rate regime. As a result, market supply and demand has played a decisive role in the pricing of the renminbi against other currencies.

Reforming the exchange rate regime has been an important part of the programme of market-based reforms designed to allow the market to play a decisive role in resource allocation in the Chinese economy. We in China recognise that although the short-term effect of currency manipulation is a subject of much debate, from a long-term perspective such behaviour violates the natural laws that govern the functioning of the market. We also know that it will always eventually invite punishment from the market.